Two Types of Liquidation that Shareholders and Creditors Can Choose From

Simply hearing the word “liquidation” gives people the idea that it is a long process that requires a lot of work. This is mainly because legal matters are involved, making it overwhelming and quite difficult to deal with. Not most people are effective in facing this kind of situation. Not everybody knows what should be done when a company is facing financial problems and in the brink of crumbling down.

This is why liquidators are available to be reached by companies that are insolvent, and deregistration consultants in Dubai are also within reach for consultation and advising lest business owners are thinking that their company might need to take a step. Having one to take care of your affairs will help you in relieving some of the stress that you have to go through in dealing with this stage in your life.

In light of this, business people should know what liquidation is all about and what it means. There are important things to know about this subject, and it would be better to start off with knowing what liquidation really is all about and its types. Being knowledgeable about this part does not necessarily mean that you would not need help anymore. It will simply be easier for you to understand this kind of situations and can more likely help you in decision-making when you are facing the same circumstances.

What Does Liquidation Connote?

This kind of process is about putting an end to the operations of the business. Known as winding up as well, it is when a company has to put a stop to its existence because of some factors. At this stage, the assets of the company are sold to pay off their debts and the remnant will then be distributed to the shareholders.

Types of Liquidation

There are two types of liquidation in the United Arab Emirates (UAE), wherein both categories mean that the business is already insolvent and there is no chance for it to get back up to its feet. So, these two types can give the insolvent businesses the choice on what they would want to do. Liquidation can either be compulsory or voluntary, depending on the circumstances.

Voluntary Liquidation

A voluntary liquidation happens when the shareholders or the owner of the company himself decide to stop running the business because it is not fit to operate anymore. In this case, the risk of being forced to liquidate and be accused falsely is eradicated by taking this action.

In this stage, the shareholders or directors of a company called in for a meeting with the creditors. This is when they all decide which liquidator they would want to take care the liquidation process. The distribution of assets is also discussed in this meeting and they agree on the terms they would like to apply.

Compulsory Liquidation

On the other hand, this category of liquidation is when the court has ordered for a company to be liquidated. Usually, it is the creditors themselves who take the first step by filing a request to the court. When directors are brought to the court because of a request by creditors, it is believed that it is risky because there is a chance that they will be wrongfully accused.

This only happens to companies who have been failing to pay off their debts and have reached its life expectancy by being insolvent. The continuous non-payment of a company can push the creditors to not simply push and encourage them to pay plenty of times but eventually to also petition for its liquidation. This is the compulsory liquidation because it is not in the will of the shareholders to have their company be liquidated but they are only forced to do so by the demand of the court.

Top company Liquidation in Dubai

When wanting to be sure if you should indeed take the first step in liquidation or if there is still a chance that your company can cope up with what it is going through, deregistration consultants in Dubai should be sought by businessmen in order for them to assess their situation and make an effective decision that would better serve everybody involved.

FAR – Farhat Office & Co. has been in the liquidation industry for more than 30 years, being a top company liquidation in Dubai that can ensure that you will not only be advised in the best way possible but also to have the easiest and smoothest liquidation process that you can possibly have for your own benefit and for you to relieve the stress of having to deal with it.

With this, you are welcome to check more about our services and contact us to book a consultation for you to further understand what liquidation truly connotes.